You may have heard that your estate must pass through probate after you pass away, and that there is really no easy way around it. This is not necessarily true. There are certain types of asset transfers that would not be subject to the probate process. These transfers could take place organically, even if you are not intentionally trying to avoid probate.
Let’s look at a few of these probate-free asset transfers.
Payable on Death Accounts
If you were to open an account at a bank, you would have the option of adding a beneficiary. This can also be the case when you are opening up a brokerage account. These accounts are called payable on death accounts or transfer on death accounts. They can also be referred to as Totten trusts.
The beneficiary would not have the ability to touch the funds while you are living. After you are gone, the beneficiary would assume ownership of any remainder that may exist in the account. This transfer would not be subject to the process of probate.
Despite the fact that a POD account may avoid probate, it may not be the best method for transferring assets for a variety of other reasons. Before choosing this technique, it would be wise to speak with an experienced and qualified estate planning attorney.
The beneficiary that you name on your insurance policies would be paid by the company after you pass away, assuming all contractual obligations were met. The probate process would not enter the picture. Care must be used in selecting a beneficiary because outright distributions to individuals may not be the wisest idea.
Co-Ownership of Property
You could add a co-owner to property that is in your possession. This is called joint tenancy. After the death of one joint tenant, the surviving joint tenant would assume ownership of the entirety of the property in question, and probate would not be a factor. Numerous problems can arise, however, when joint tenancy is used, including exposure to other’s creditors and predators as well as undesirable tax consequences.
Proactive Probate Avoidance
Before we look at a commonly embraced probate avoidance tool, we should answer a simple question: Why would anyone want to avoid probate in the first place?
Probate is time-consuming, and the heirs do not receive their inheritances while the estate is being probated by the court. You are looking at close to a year, even if there are no complications. There are expenses that accumulate during probate, and they can be significant. This is a second drawback. Lastly, probate is a public proceeding, so anyone who is interested could find out how you decided to distribute your resources.
Living trusts are often utilized by people who want to facilitate asset transfers outside of probate. As the grantor of the trust, you maintain control of the assets while you are living. After you are gone, the trustee that you name in the trust agreement would be empowered to distribute assets to the beneficiaries outside of probate.
Set Up a Consultation
We have provided some food for thought in this brief blog post. If you would like to discuss your estate planning options with an experienced and qualified estate planning attorney, contact us through this page to schedule aconsultation: Sacramento CA Estate Planning Attorneys